Micron Bets $150 Billion on Memory Chip Production, R&D by 2030

Micron said it plans to spend more than $150 billion on its global manufacturing operations and research and development (R&D) outlays over the next decade to help address a rise in demand for memory chips.

The Boise, Idaho-based company said it is currently engaged with government officials around the world, including in the U.S., to discuss plans for fab expansions or the possible construction of a new fab. Micron is the last U.S. manufacturer of DRAM and 3D NAND flash memory.

Micron said memory chip sales have soared in recent years, accounting for about 30% of the $460 billion global semiconductor market, up from 10% a decade ago. The company is gearing up for faster growth in the future, driven by demand for DRAM and NAND flash in everything from smartphones and data centers to cars. Micron has argued that demand in the infamously boom-and-bust sector is more durable than ever.

U.S. cloud computing giants such as Amazon AWS, Google, and Microsoft will also be big buyers of memory and storage going forward. 

Micron runs one of the world’s most advanced semiconductor R&D centers at its Boise, Idaho, headquarters, and it also rolls out special-purpose memory chips for cars from its chip fab in Oregon. But its most advanced memory chips for smartphones, PCs, and data centers are made in South Korea, Southeast Asia, and Taiwan. 

The new budget signals that Micron is open to investing more in its US foundry operations. But it also wants political leaders to step up and fund federal subsidies and tax credits to defray higher costs in the U.S. 

“Memory is at the leading edge of semiconductor manufacturing,” Micron CEO Sanjay Mehrotra said in a statement. “We look forward to working with governments around the world, including the U.S. where CHIPS funding and the FABS Act would open the door to new industry investments, as we consider sites to support future expansion.”

The spending pledge comes as the global chip shortage rages unabated. The upending of the global supply chain is making it impossible in many cases for manufacturers to ship chips to customers urgently in need. Micron, Intel, and other major industry players are taking advantage, urging the U.S. government to invest more in the industry to assure future supply and offer subsidies or other assistance to land domestic fabs.

In February, Micron was one of more than 20 major U.S. chip companies that signed onto a letter calling on the White House to offer larger subsidies and other inducements to support more made-in-the-U.S.A. chips.

Semiconductor firms have long lamented that the higher cost of building and operating in the U.S. has forced chip production abroad. They say chip manufacturers have been lured by a combination of factors such as reduced labor costs and larger subsidies and tax credits. As a result, the U.S. share of global chip production capacity has dipped from more than a third in 1990 to slightly more than 10% in 2020, industry analysts say.

Micron said government subsidies will be necessary to offset the higher cost of manufacturing memory chips in the U.S. The company said costs run 35 to 45% higher in the U.S. than countries in Asia with existing semiconductor ecosystems.

The White House has been pushing for tens of billions in subsidies and other inducements to strengthen the self-sufficiency of the U.S. chip industry.

The Senate in June passed the U.S. Innovation and Competition Act (USICA) that includes $52 billion to fund the CHIPS for America Act. The proposal is currently being debated by the House of Representatives.

The U.S. semiconductor industry is also lobbying for the Facilitating American Built Semiconductors (FABS) Act, which was introduced in the Senate in June and would put in place a 25% investment tax credit for U.S. fabs and chip-making tools that go inside them. The industry is in favor of the bill because it promises to offer long-term resources for chip firms to retool, expand, and upgrade the equipment in their factories.

"Our markets demand cost-competitive operations," Micron Senior Vice President of Global Operations Manish Bhatia said in a statement. “Sustained government support is essential for Micron to ensure a resilient supply chain and reinforce technology leadership for the long term.”

The spending spree should help Micron remain competitive with rivals, including South Korea’s Samsung Electronics and SK Hynix, Japan's Kioxia, and China’s other up-and-coming memory chip manufacturers.

Investing in fab capacity is one of the costliest endeavors imaginable. Building an advanced production plant for logic or memory chips is a multi-billion dollar bet that has to be placed several years in advance.

Micron has spelled out plans for up to $12 billion in capital expenditures in the current fiscal year, up from $9.7 billion in the previous year, as it upgrades more of its product portfolio to 176-layer 3D NAND, which surpasses rivals' 128-layer NAND, and 1-alpha node DRAM, which improves memory density compared to its 1z node. It is also targeting a roughly $3 billion budget for research and development (R&D) this year.

Micron is also ordering EUV lithography tools to upgrade its memory chip fabs. The company plans to start mass-producing advanced memory chips with the systems, which can cost more than $100 million each, by 2024.

MIcron's plan comes as other semiconductor giants have announced hundreds of billions of dollars in new spending to expand capacity and help ease the global chip shortage.

TSMC, the world's largest made-to-order chip foundry with clients including Apple, Nvidia, AMD, and even Intel, has revealed plans to invest $100 billion over the next three years to meet growing demand for chips.

Intel has invested aggressively to expand its foundry operations as part of its IDM 2.0 strategy to regain its technology leadership. The semiconductor giant plans to spend $20 billion on a pair of new foundries in Arizona. Intel in September pledged up to $95 billion to bring more chip manufacturing capacity to Europe. It also reportedly plans to announce additional foundry capacity in the U.S. and Europe by the end of 2021.

Samsung, which dominates the market for DRAM and NAND flash memory chips, said in May it plans to invest more than $150 billion in a decade to expand its internal chip manufacturing and foundry operations, up from a previous pledge of $115 billion by 2030. A large portion of the funding could bolster its foundry operations in the U.S., where it is scouting for subsidies or tax breaks to help build a potential $17 billion fab.

Top U.S. contract chip makers Globalfoundries intends to spend more than $6 billion globally in 2021 to expand its overall production capacity and to double its output of automobile-grade chips by the end of the year.